Any employer would want to keep good employees around, and one of the best ways to make that happen is by making sure your most productive workers get the right amount of pay. This is one of the main reasons why many businesses prefer a merit pay system. What is the merit pay salary system, and will you be able to implement it in your company?
The concept behind the merit pay system is pretty straightforward: employees that perform better than expected get paid extra. Adapting the merit pay system to your company’s current salary system is one way of telling your employees that they did a good job. However, transitioning to this kind of salary system without prior planning may cause problems that could take away its potential positive effects on your company. Check out these list of things to consider to make sure the shift happens as smoothly as possible.
- Establish a clear set of metrics and let employees know about it.
It’s important to reward employees that go the extra mile, but how can you check if your employees are actually performing well? For this purpose, you must set clear metrics to properly evaluate each employee if you want a more consistent merit pay system.
Having clear metrics doesn’t just help you track your workers’ productivity. By knowing how the merit pay system works and having full knowledge of which factors can affect their salary the most, an employee can make specific changes to the way they work so that they can do something about areas that need improvement and stay consistent in areas that they already excel in.
- Use the right tools for managing salary
Thanks to the availability of different types of intuitive merit and salary management software in the market today, switching to a merit pay system is a lot easier than how it was before. However, you have to make sure that the software you pick has all the necessary features such as reporting and analytics, change tracking tool, and efficient communication features.
Using the right tools to manage the new salary system also makes it easier to plan ahead. For example, data saved through scheduled reports can help in spotting positive trends that your company can capitalize on. On the other hand, a proper tracking feature is handy for keeping tabs on recent salary adjustments or manual changes to the system so it’ll be easier to find what’s wrong in case a problem suddenly occurs.
- Give employees plenty of opportunities to improve themselves.
A lot of employees are worried about performance reviews and with good reason: if it takes a long time between reviews (and salary adjustments), employees may not feel motivated enough once the more recent job skill evaluation has ended. This could even cause employees to feel discouraged and experience weeks or even months of not performing properly.
Part of giving your employees a better opportunity is by having more frequent evaluations. For example, if you’re used to yearly evaluations, consider switching to a quarterly basis. That way, your employee gets more frequent feedback that can help them improve their performance.
- Set reasonable increases.
A merit pay system only works if the rewards are good enough. For example, why would an employee work twice as hard if the salary or bonus is barely noticeable? If you want employees to perform better, give them a good enough reason to actually perform better.
Setting reasonable salary increases or bonuses should also take your company into consideration when making the decision. If the rewards are too much, you might end up spending more on rewarding good employees instead of spending on other company-related things.
A merit pay system is a great way to make employees more inclined to strive better and feel job satisfaction with good rewards. Knowing what factors to consider before integrating this salary and bonus system to your company may be the difference between a smooth transition or a mountain of challenges later on.